Financial Advisors' Views of the Post-RDR Landscape

Introduction

Financial advisors have seen their business damaged by current market conditions and are concerned about their future relationship with providers during challenging restructures to business arising from regulatory burdens and threats in distribution channels. Providers must actively offer adequate support to IFAs in order to save the value of business.

Scope

*Reveals IFAs' opinion of how the RDR will change the competitive structure of distribution in the UK

*In-depth analyses of the relative attractiveness of various products during the downturn and of the future competitive market structure.

*Benchmarks leading L&P and Asset Management firms in terms of their product offerings and elements of service.

Highlights

The most important trigger for visiting an advisor is for retirement planning advice, with 70% indicating this as a very important factor

When advisors were asked who they see as the main competition for clients in their market, 64% stated high street banks to pose the main threat for their client base. This was followed by 53% of advisors who see the rise of online price comparison sites as the main competitor for their client base.

A significantly large proportion of IFAs responded to say they anticipated the RDR to leave a 'middle market' of clients who will have no access to advice

Reasons to Purchase

*Understand where IFAs' fears for the post-RDR world are coming from.

*Assess the opportunies for other competitors to seize market share from IFAs.

*Access the results of Datamonitor's Q2 2009 IFA survey.

Report Highlights
Highlights

The most important trigger for visiting an advisor is for retirement planning advice, with 70% indicating this as a very important factor

When advisors were asked who they see as the main competition for clients in their market, 64% stated high street banks to pose the main threat for their client base. This was followed by 53% of advisors who see the rise of online price comparison sites as the main competitor for their client base.

A significantly large proportion of IFAs responded to say they anticipated the RDR to leave a 'middle market' of clients who will have no access to advice
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Table of Contents 3
Table of figures 5
Table of tables 6
ADVISORS IDENTIFY PROVIDER AND CUSTOMER PREFERENCES 7
Introduction to Datamonitor's Q2 2009 Financial Advisor Survey 7
The financial advisory market is predominantly occupied by small, single outlet firms 7
Abbey and HSBC continue to be less popular among advisors 10
Among life assurers, Abbey continues to attract a net negative response from IFAs 10
Skandia is rated positively by IFAs for its level of service and quality of products in contrast to Abbey 10
IFAs continue to have a strong opinion of Invesco Perpetual's levels of service and quality of products in Q2 2009 12
HSBC received the least positive votes from advisors 13
The most important trigger for visiting an advisor is to receive retirement planning advice 14
Personal recommendations are vital when choosing an IFA 15
PROVIDERS NEED TO DEVELOP TAILORED SOLUTIONs FOR ADVISORS DURING ECONOMIC AND REGULATORY CHALLENGES 17
Economic turmoil represents the biggest challenge for the IFA market 17
Providers' product innovations must focus on the risk profile of today's consumers 18
Individual savings accounts stand out as the product IFAs are most positive about 18
Income protection has the best outlook while whole-of-life is the least attractive option among protection products 19
Advisors are expecting consumers to re-evaluate their need for income protection during a global economic crisis 19
Future sales of mortgage-related term will be impacted by the pessimistic housing market but saving-related term will fare better as customers become cautious over their finances 20
Advisors are not confident of growth potential in CII over the next six months 21
Whole-of-life policies still have their place in the protection market as consumers take a cautious stance on household financial stability 21
Protection sales can be maintained if their importance is highlighted in the current economic climate 22
Advisors are uncertain about the future sales of investment bonds 22
Sales of mutual funds will gain growth potential once equity prices become more attractive 23
Individual SIPPs will prove to be a less difficult sale compared to other pension products 24
The increasing interest in SIPPs does not necessarily signal the end of personal and stakeholder pensions 24
IFAs expect the RDR to create a more competitive distribution environment 26
IFAs perceive high street banks as the biggest competitor for clients in their market 26
Banks are suited to offering simpler life and pensions products such as mortgage-related protection insurance 26
Banks will focus more on selling protection to offset mortgage-related protection sales 27
The protection industry has suffered from a lack of consumer engagement with its products 27
The solution to extending protection to the mass market may be through direct-to-consumer channels 27
However, advisors still have a prime opportunity to revisit clients, increase consumer awareness and change perceptions of protection 28
The recently tarnished brand reputation of banks will limit their entry into the life, pensions and investment market 29
Banks are perceived to be unable to offer the same level of service and advice as IFAs but this may change in the post-RDR landscape 30
Online price comparison sites are also a strong contender for IFAs' client base 32
Aggregator sites challenge the distribution landscape and more pertinently protection sales 32
Aggregator sites have become a trusted source of financial service in the current climate 32
Aggregator sites offer a wealth of opportunity 33
Concerns and criticisms have been leveled at non-advised sales 33
Problems are also arising between the direct sales and advisor channels 34
Those who are able to offer open architecture and unique solutions to clients' needs will harness the competitive advantage 34
IFAs have an advantage over wealth managers in being able to offer truly independent advice 34
IFAs rank their ability to provide unique solutions to clients as their greatest strength 36
However, IFAs and wealth managers both believe that their strength lies in having personal relationships with clients 38
An even closer client relationship can be fostered through regular and more frequent contact 39
Providers who can invest in technology today have an opportunity to gain a competitive advantage 41
Providers should bring in end-customer-focused propositions while uncertainty surrounds RDR impact on the IFA-centric model 42
Advisors do not believe that the RDR will hit the target of increasing consumers' access to financial advice 42
IFAs believe they will be forced out of the market as a result of the RDR 43
Whatever uncertainty surrounds the impact of RDR, changes to an IFA's business model are essential for success 44
The end-customer should receive clarity of communication if the RDR is to succeed 45
The final focus must be on meeting customers' needs and demands for financial advice 46
APPENDIX 47
Data 47
Definitions 58
Single premium policy 58
Regular premium 58
Wrap accounts 58
Product definitions 58
Life based savings products 58
Life Assurance 58
Single premium life 59
With-profit bond 59
Unit-linked bond 59
Income and growth bonds 59
Guaranteed equity bonds 59
Distribution bonds 59
Purchased life annuities 59
Other bonds 60
ISAs 60
Matrix-Data definitions 60
IFA firm types 60
Further reading 60
Ask the analyst 60
Datamonitor consulting 61
Disclaimer 61
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List of Tables
Table 1: How do you see business in each of the following areas changing over the next six months? 23
Table 2: How do most of your clients find you? 47
Table 3: What type of organization do you work for? 47
Table 4: Please rate the following providers in terms of the level of service they provide to you? (1-5, with 5 being highest level of service and 1 being lowest) 48
Table 5: Please rate the following providers in terms of the quality of products they offer? (1-5, with 5 being highest level of quality and 1 being lowest) 49
Table 6: Roughly, what proportion of your customer base falls into each of the following asset bands? 50
Table 7: How important are each of the following as triggers for clients coming to an IFA? 50
Table 8: On average, how often do you speak to your clients on the telephone? 51
Table 9: On average, how often do you speak to your clients face to face? 51
Table 10: To what extent do you see the following as a challenge for the IFA market? 52
Table 11: Who do you see as the main competition for clients in your market? 52
Table 12: Thinking about the changes the RDR will bring to the structure of the market, to what extent do you agree with the following statements? 53
Table 13: To what extent do you see each of the following as limiting factors in banks' attempts to enter this market? 53
Table 14: In what areas of your business and service do you see banks as most competition to you? 54
Table 15: Thinking about the potential threat that banks pose to the IFA industry, please indicate the extent to which you agree with each of the following statements. 54
Table 16: Thinking about your clients, to what extent do you agree with each of the following statements? 55
Table 17: Which of the following do you consider to be relative strengths of IFAs over wealth managers? 55
Table 18: Thinking about the changes the RDR will bring to the structure of the market, to what extent do you agree with the following statements? 56
Table 19: Thinking about the possible changes to the nature of the wealth management market in the UK, to what extent do you agree with the following statements? 57
Table 20: In what areas of your business and service do you see wealth managers as most competition to you? 57
List of Figures
Figure 1: The IFA industry is mostly made up of single outlet firms 8
Figure 2: The clients of the IFAs surveyed tend to be at the lower end of the asset band spectrum 9
Figure 3: Advisors rate Skandia highly for the level of service it provides 11
Figure 4: Advisors perceive Skandia to have high quality product ranges 12
Figure 5: Invesco Perpetual is perceived as offering best level of service in relation to other asset managers 13
Figure 6: Advisors rank Invesco Perpetual highly for the quality of its products 14
Figure 7: Advice on retirement planning is a very important trigger for a customer to visit an IFA 15
Figure 8: Most clients find IFAs through personal recommendations from others 16
Figure 9: IFAs perceive current economic conditions to be the most important challenge to their market 17
Figure 10: ISAs have the most growth potential over the next six months 20
Figure 11: High street banks pose the biggest threat to advisors 26
Figure 12: Banks pose a stronger threat to IFAs in terms of being able to offer advice for protection insurance 28
Figure 13: Banks' tarnished brands and reputations will be a hindrance against their entry into the life and pensions market 30
Figure 14: Banks do not pose a potentially strong threat to IFAs in terms of the service levels they provide 31
Figure 15: Advisors strongly agree that HNW clients are defecting to IFAs due to the truly independent service they offer 35
Figure 16: IFAs' weakest competitive factor is in technology 37
Figure 17: Advisors believe their clients prefer the greater level of personal contact IFAs can provide over wealth managers 39
Figure 18: Advisors speak to clients by phone approximately twice a year 40
Figure 19: IFAs speak to clients face-to-face approximately once a year 41
Figure 20: The RDR will leave a middle market of clients who have no access to advice 43
Figure 21: Advisors think IFA firms will be forced out of the market by RDR 44
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